Indonesia is discussing bringing forward a ban on mineral ore exports that was previously set to begin in 2022, but no decision has yet been made on such a move, its trade minister said on Friday.
Worries about possible shortages had pushed benchmark nickel on the London Metal Exchange nearly 40% higher since early July to a peak on Thursday of $16,690 a tonne, the highest since April 2018. It has since pared those gains.
"I don't think a ban makes sense and it looks like the market is pricing in a full ban, so I think the risks are to the downside," said Colin Hamilton, director of commodities research at BMO Capital.
The rational thing would be for Indonesia to conduct an audit of refined nickel projects and slap an export ban only on those not making adequate progress, he added.
"If nothing happens, then the nickel price is about 20% too high, but there's a chance and it's hard to quantify that chance, that we get something, and then the nickel market is suddenly in a bigger raw material deficit than we thought."
Three-month LME nickel had slid 2.3% to $15,515 a tonne by 1445 GMT, but was on course to add 7.4% this week.
* ZINC: LME zinc tumbled 2.6% to $2,243.50 a tonne after touching the lowest since October 2016 at $2,239.50 a tonne on worries about oversupply.
"Supply is now expected to outweigh demand in the second half of 2019 as new mine supply returns to market and Chinese bottlenecks retreat," Nicky Shiels, commodity strategist at Scotiabank, said in a note this week.
* CHINESE NPI: Supply of stainless steel ingredient nickel pig iron on the Chinese spot market is "still relatively tight and some stainless steel plants have already locked in orders until the end of September", Huatai Futures said in a note.
* CHINESE PRODUCER PRICES: Metals were pressured after factory gate prices in top metals consumer China shrank for the first time in three years in July, stoking deflation worries and adding pressure on Beijing to deliver more stimulus.
* LEAD TIME SPREADS: The premium of cash LME lead over the three-month contract jumped to $29.50 a tonne by Thursday's close, the strongest since June 11, from $3.50 two days earlier, indicating near-term shortages of material in the LME system. The premium eased to $21 on Friday.
One party has control of 50%-80% of LME inventories, data showed on Friday. LME lead dipped 0.1% to $2,069 a tonne after touching a two-week high of $2,077.50.
* PRICES: LME copper shed 0.7% to $5,757 a tonne, aluminium edged up 0.1% to $1,779.50 and tin dipped 0.1% to $16,840.